How to Use Market-Basket Analysis in Data Driven Marketing

One data driven marketing strategy that has been around for a while involves trying to understand what products are purchased in bundles. There are obvious product bundles. You need paper when you buy a new printer, for example. But there are sometimes not so obvious bundles.

Increasingly sophisticated analysis techniques are being used to cull through large amounts of transaction data to find those less obvious bundles. This type of analysis is known as market-basket analysis.

Whenever the subject of market baskets comes up, you’re likely to hear someone bring up a famous story on the subject. In the early days of this sort of analysis, a grocery store chain began analyzing its data to look for products that were purchased together. Much to their surprise, so the story goes, they found that when men bought baby diapers very frequently also bought beer.

You’ll probably never see a diaper display next to the beer cooler in a grocery store. But it does illustrate the potential element of surprise inherent in data analysis. Unexpected patterns do exist and can be used to your advantage.

But grocery stores do tend to be pretty good at this sort of analysis. When shopping for Thanksgiving dinner, you rarely have to actually walk down an aisle. The supplies for various traditional side dishes are all laid out at the ends of the aisles.

One display has the green beans, mushroom soup, and fried onions for the green bean casserole. Another has the canned pumpkin, brown sugar, and condensed milk for pumpkin pie.

You often see the results of market-basket analysis when you shop online. Whether its books, clothes, or appliances, you frequently get prompted with a message about what other customers bought along with a particular item. People who bought this also bought these things...